RE: FTC Statement of Policy Regarding Communications in Connection With
Collection of a Decedent’s Debt

Dear Mr. Koegel:

The Privacy Rights Clearinghouse[1]
appreciates the opportunity to comment on the Federal Trade Commission’s (FTC
or Commission) statement of policy regarding a debt collector’s attempts to
collect a deceased person’s debt. We address our comments as follows:

Debt collector contacts are limited by the Fair Debt
Collection Practices Act (FDCPA) to the consumer who is claimed to owe the
debt, or, when the consumer is deceased, to the consumer’s spouse, parent (if
the consumer is a minor) guardian, executor, or administrator. Privacy for the
debtor, even if deceased, and the right to be free of harassment about the debt
of others is the moving force behind Congress’ decision to keep collectors from
contacting relatives, friends, neighbors, employers or anyone else about an
individual’s private business affairs.

On October 8, 2010, the FTC announced a policy regarding
debt collectors’ communications with third parties regarding a decedent’s debt.[2] In
this, the FTC expands the numbers of individuals a collector may contact when
the debtor is deceased. This, the FTC explains, is in response to new
categories of individuals with authority to settle an estate under the Uniform
Probate Code (UPC) now adopted by many states. In most cases, the identity of
the person designated to settle the estate will be revealed in public probate
court filings. When this is not the case, the FTC’s policy would allow
collectors to “initiate a written or oral communication to the decedent’s
estate.”

According to the Commission’s policy statement, the agency
will not commence an enforcement action against collectors who contact those
other than a decedent’s spouse, guardian, parent or personal representative.
The policy statement makes clear that collectors must follow the FDCPA by
refraining from misleading and deceptive practices.

However, the Commission says nothing about other FDCPA
rights that would be available to a debtor if he or she were alive. To remedy
this, the FTC should be clear that survivors, personal representatives, or
others designated under UPC procedures have the same rights as the deceased,
that is the right to request verification of a deceased person’s debt, the
right to dispute the debt, and the right to request that the collector cease
contact.

We urge the Commission to reconsider this policy or at a
minimum to offer guidance for individuals who may be contacted by a collector
about a deceased consumer’s debt. We further urge the Commission to reconsider
its policy regarding no enforcement for deceased debtor contacts.

Debt collection, without a doubt, cannot be an easy job. At
the same time, Congress has set the standard in the FDCPA for legitimate debts
to be collected only in a fair and respectful manner without unwarranted
invasions of privacy. Yet, the debt collection industry is rife with abusive
practices, often involving repeated contacts with friends, neighbors,
employers, even perfect strangers.

Abusive behavior is, in fact, so pervasive in the debt
collection industry that Congress requires the Commission to submit an annual
report to explain what the agency has done to curtail abuse and violations of
the FDCPA. The Commission’s most recent report to Congress identifies an array
of problems encountered by consumers in dealing with debt collectors:

Such practices cause substantial consumer injury,
including payment of amounts not owed, unintended waivers of rights, invasions
of privacy, and emotional distress. In some circumstances, illegal collection
practices can place consumers deeper in debt.

According
to the FTC’s latest report to Congress, the agency receives more complaints
about the debt collection industry than any other industry. (2010 Annual
Report, page 5) A significant number of complaints filed with the FTC involve
contacts with persons other than the consumer claimed to owe the debt as well
as disclosure to third parties of details about the consumer’s private
business. (2010 Annual Report, page 9)

Likewise,
many consumers contact the PRC, through the telephone hotline or by email, to
complain about abusive and repeated contacts by aggressive debt collectors.[4]
Often consumers report that collectors have contacted employers, neighbors or
relatives, even when the collector knows where to find the consumer who is said
to owe the debt. Complaints about debt collector contacts also come to the PRC from
relatives, former roommates, even people who do not know the debtor but have a
similar name or may have the telephone number the targeted consumer previously
had.

The
volume and kinds of complaints should be enough to alert the Commission that
third party contacts by debt collectors are a major problem. When such problems
exist while a consumer is still living, the problem can only get worse for
survivors. Instances of contacts with third parties by collectors trying to
“track down” the person with “authority to pay” the decedent’s debts promises
to result in a flood of unwarranted, invasive questions and unwarranted revelations
of private details about a deceased’s affairs.

Regrettably,
the FTC’s policy statement places no restrictions on who a collector might
contact about a decedent’s debt. The FDCPA already allows contact with spouses,
parents, guardians, and administrators, those most likely to have authority to
settle an estate. To prevent collectors from engaging in an aggressive,
widespread inquisition of grieving survivors, distant relatives, friends, or
anyone who may have known the deceased, the FTC should revise its policy to
make it clear that collectors may contact only
individuals specified by the FDCPA or otherwise identified in public probate
court records as having authority to pay the decedent’s debts.

Contact with an individual about a deceased person’s debt
creates a situation that is ripe for abuse. Obviously, the person who incurs a
debt is in the best position to know whether the debt has been paid or, as
sometimes happens, the collector is attempting to collect a debt that is not
even owed. It is not at all unusual for an identity theft victim to first learn
about the fraud when a debt collector comes calling.

Federal law -- the FDCPA and the Fair Credit Reporting Act
(FCRA) -- give consumers some rights to remedy situations where, for example, a
debt is erroneously claimed or the consumer is a victim of identity theft. Personal representatives or others designated
to settle a deceased person’s affairs are at a great disadvantage when approached
by a debt collector.

As we all know, not everyone plans to die. In an ideal
world, the person designated or appointed to settle an estate would have
systematically organized financial records explaining the decedent’s assets and
liabilities down to the last detail. But, this is seldom the case, particularly
when a relatively young person dies suddenly.
Even in long-time marriages, it is often the case that one spouse
handles all financial matters. Upon that person’s death the survivor is left
struggling to piece the financial picture together.

Creditors and debt collectors have the right to seek
repayment of legitimate debt, even when the debtor is deceased, as long as the
contact comports with the law. The FDCPA
not only prohibits abusive and deceptive practices but also gives
consumers certain rights. The FTC’s policy statement addresses conduct the
agency expects from collectors attempting to recover the debt of a decedent.
But, nowhere does the agency offer guidance for survivors or personal
representatives that may be contacted by a debt collector.

Attempts to collect “old” debt are apparently on the rise.[5] A
new and thriving industry has emerged where companies buy “old” debt for
pennies on the dollar. The debt claimed to be owed may date back many years,
long before the seven year period the account would have fallen off the
consumer’s credit report. Profits are made when collectors are able to recover
any amount over the minimal amount paid to purchase the debt. When margins for
profit are slim, a collector may have a heightened incentive to use aggressive
tactics.

Surely, a living person would know whether the debt had been
paid or was not his or her debt at all. But, a surviving relative or personal
representative, often without complete records, would likely not have the
necessary information to assess the validity of the debt, particularly one that
dates back many years. Wanting to “do the right thing,” this would make the
survivor an easy target for unscrupulous collectors.

To reduce the likelihood that survivors, personal
representatives and others may become targets of unscrupulous debt collectors,
the FTC should require collectors who contact others about a decedent’s debt to
give notice that the person contacted has:

(1) the right to request
verification of the debt;

(2) the right to dispute the debt;
and

(3) the right have the collector
cease contact.

Further, the FTC should publish guidance on its web site
specifically for survivors or others who may be called upon to settle an
estate.

The FTC’s October 8, 2010, policy statement says that the
agency will not enforce the contact limitations of the FDCPA for contacts
related to a decedent’s debt. This is a very troubling precedent and one that is
likely to have unintended consequences. The FTC’s position in this matter both
discourages consumer complaints and encourages harassment by an industry that
is known for overly aggressive tactics.

Instead of publically stating it will not enforce certain
provisions of the FDCPA, the FTC should do what it always does. The FTC, as the
agency with the authority to enforce the FDCPA, always has the discretion not to file an enforcement action. After
investigating consumer complaints and all other information pointing to an
abuse, the FTC may make the decision not to file an enforcement action.
However, the agency should not, in this case, forego its authority to
investigate reported abuses or to file an enforcement action in an appropriate
case.

The FTC’s action in this matter discourages consumers from
complaining, even about the most egregious behavior. Complaints filed by
consumers are one of the most effective tools the Commission has in assessing
abuses in any industry.

The importance of consumer complaints to the Commission’s mission
cannot be overstated. The Commission recognizes this in its most recent FDCPA report
to Congress:

The FDCPA requires the FTC to report on the level of
industry compliance with the law. Historically, the FTC has received much of
its information about the conduct of debt collectors directly from complaints
consumers file with the FTC and from its enforcement work. The FTC uses
complaints for general monitoring of the industry, target selection, and preliminary
analysis that might, with further factual development, reveal or help prove a
law violation.

With this reporting mechanism from the public, the agency
might initiate an investigation, bringing an enforcement action or even report
to Congress that new legislation is needed to address newly reported abuses
within the business community. Indeed, in a situation such as this, the agency
should want, through consumer complaints, to monitor the effect of this recent
policy.

The FTC should encourage rather than discourage consumers
from complaining about abusive practices. It is entirely within the realm of
possibility that the FTC’s decision to expand allowed contacts in the case of a
deceased will prompt unscrupulous collectors to tell a decedent’s friends,
relatives or others that there is no reason to complain because the FTC has
said it would not listen.

There is no dispute that creditors have the right to
repayment of legitimate debt, even when the person who incurred the debt is
deceased. The FDCPA and state probate laws adopted under the UPC give creditors
and debt collectors numerous categories of individuals to contact about a
decedent’s debt. The FTC’s policy should be restated to allow contact about a
decedent’s debt only with individuals specified by the FDCPA or identified in
public probate court records.

We urge the FTC to reconsider its position of forgoing
enforcement in any case. This is particularly important when it involves an
industry so closely associated with abusive practices as documented in numerous
consumer complaints.

We also urge the Commission to require collectors who
initiate contacts about a decedent’s debt to advise those contacted that they
have the same FDCPA rights as the deceased to (1) request verification of the
debt; (2) dispute the debt; and (3) demand that the collector cease contacts
about the debt.

The FTC should also publish guidance on its website for
survivors and personal representatives who may be contacted by a debt
collector.

[1] The
Privacy Rights Clearinghouse is a nonprofit consumer education and advocacy
organization based in San Diego,
CA, and established in 1992. The
PRC advises consumers on a variety of informational privacy issues, including
financial privacy, medical privacy and identity theft, through a series of fact
sheets as well as individual counseling available via telephone and e-mail. It
represents consumers’ interests in legislative and regulatory proceedings on
the state and federal levels.

[4] The PRC
has published a guide for consumers which discusses FDCPA rights and offers
tips on dealing with debt collectors. Debt
Collection Practices: When Hardball Tactics Go Too Far, www.privacyrights.org/fs/fs27-debtcoll.htm[5]